Living trusts, also called revocable trusts or family trusts, are not for everyone. There are lawyers who will bombard you with a litany of scare stories, insisting that having a trust is the only way to go. Here are some of the scare stories: Probate is a disaster and takes years; the Government will get your property; you will lose the estate to taxes; and the probate fees will eat up the entire estate unless you have a trust. There may be some truth to all of these, but the answer for you is certainly not a one-size-fits-all estate plan.

What is a Living Trust?

A living trust is a legal entity you set up to hold your assets to avoid probate and in some cases where people have a substantial estate, a trust can be used to minimize estate taxes.

Let’s take a realistic look at some of the issues surrounding living trusts.

Should you avoid probate at all costs?

Not always. If the value of the estate is low, then a small estate probate can be less expensive than a trust.

How expensive is probate?

If an estate goes through probate, the probate fees, including the personal representative’s fee and the attorney fee can be expensive. However, if you are under 60 and healthy, the probate expenses will occur in the distant future, paid by your children, but the cost of paying a lawyer for the trust is paid now by you. A will costs less now, and allows you to invest the saved money for later.

Won’t attorney fees in probate eat up the entire estate?

Valid creditor’s claims, medical bills and unpaid back taxes are much more likely to eat up the assets of the estate than attorney fees and the statutory personal representative’s fee. Attorney fees are paid at the end of the probate, and must be approved by the judge.

Doesn’t a living trust save on taxes?

A living trust will not save your family money on income or estate taxes. A trust is tax neutral.

How do I choose a lawyer?

Not every lawyer gets along with every client and the opposite is equally true as well. It is a personal professional relationship. Choose someone that you think you can get along with, by asking them hard questions up front. Choose someone who has experience, will promise to answer your calls, and someone who will explain their fee structure. Call several lawyers and compare services and prices. If someone will not talk to you on the phone, thank them for their time, hang up and call another.

At what age should you consider creating a living trust?

If you are in your late 60’s, 70’s or 80’s and have substantial assets, sometimes a trust makes sense. Just as often, it does not make sense. Each situation is different. A living trust is more expensive to create, and the savings to your family, if any, will only be realized after death. Therefore, if you create a trust at too young an age, any savings are far down the road, and you are spending money that would be better invested. Money spent on a trust is money out of your pocket now, whereas probate fees are paid out of your children’s inheritances. If you are in your 80’s, the savings to your family from a trust will be realized much sooner, and buying a trust might make a whole lot more sense.

Isn’t a trust easy to administer?

Not really. A Living Trust is not so simple to set up or administer over your lifetime. If you set up a trust, you have to pay attention to it for the rest of your life. All your assets must be legally transferred into the trust for it to be effective. If you leave out an asset, or buy a new asset and fail to put it into the trust, your family could end up with an unnecessary double administration after you die: A probate administration for the assets outside of the trust, followed by a trust administration for the assets inside the trust. A double administration will not save your family money.

Will my family be able to administer my trust after my death without a lawyer?

A successor trustee should get professional advice after the death of the person who created the trust. Sometimes not much needs to be done, but sometimes a lot needs to be done. Let an expert help you. The trustee should make sure he or she does not miss any important legal issues. The trustee is personally liable for mistakes, so hiring a lawyer is useful to make sure the trustee does not get sued later by disgruntled heirs or creditors. Administering a trust in some simple cases can be pretty easy and cost effective, but in other cases a trust administration can be just as costly as a probate. If the plan in the trust calls for the creation of a credit shelter trust after one spouse dies, the successor trustee should definitely hire an attorney to help set up the credit shelter trust after one spouse dies.

What about joint ownership with right of survivorship?

With a spouse, yes. Joint ownership of assets with a spouse avoids probate. Beneficiary provisions on life insurance and annuities also avoid probate. Beneficiary provisions are safe to use. However, please never put your children’s names on your real estate, or financial accounts as joint owners. If your children get sued, divorced, bankrupted or get in trouble with the IRS, your assets might be garnished by your children’s creditors!

Isn’t a trust private after death?

A living trust administration after the death of the creator of the trust is private and is performed informally, outside of the court’s review. This can be very desirable, and is an advantage for high net worth people. However, I have seen situations where unscrupulous trustees take advantage of the informal and private procedures of trust administration to hide assets, and even to steal assets from beneficiaries. In a probate, it is unlikely that a personal representative will be able to steal assets, since the court record shows all of the critical information, and each beneficiary is given a formal right to contest the probate. If you create a trust, only choose the most trustworthy person you know to be a successor trustee.

Frequently Asked Questions About Wills in Oregon

Should I have a will?

Yes. Everyone should have a will. If you have a will, you get to decide who receives your estate, who acts as a personal representative, and you can waive the bond fee. If you have minor children, you can name a trustee to manage their money until they reach a responsible age (most people choose 25 or 30), and you can name a guardian who will raise your children if you are not alive.

What if I do not have a will?

Oregon has a will for everyone who does not have a will, called “intestacy”. Your estate will go to your “intestate heirs”. The State of Oregon will not receive your estate. If you do not have a will, you do not get to choose the personal representative, or the distribution plan, and the court will require a bond for the probate.

Is my Oregon will valid in other states?

Yes. Oregon wills are valid in other states. Wills properly prepared in other states are also valid in Oregon.

Can the personal representative live in another state?

Yes, no problem. Choose the most trustworthy person as a personal representative, regardless of where they live.

Do wills go through probate?

Yes. All wills go through probate to be valid. A will is not valid until after death, and it is not valid until the Probate Court officially appoints the personal representative. All assets owned by the deceased person in their name alone are distributed by the will.

I have minor children. What type of Oregon will should I have?

If you have young children, you should have an Oregon will with a trust provision built in. You get to choose the trustee, who will manage the money, and you get to choose the guardian, who will raise your children. You can name the same person as trustee and guardian, or you can name different people to these jobs.

How can I avoid probate?

Probate is avoided by means of joint ownership, beneficiary provisions on life insurance and annuities, and revocable trusts. However, each of these methods of avoiding probate can have serious negative side effects, depending on your family situation. Call me to discuss your family estate plan. I will not steer you in the wrong direction.

Should I put my children’s names on my real estate and bank accounts to avoid probate?

No. Never do this. If you put your children’s names as joint owners on your assets, and if your children then get sued, divorced, in an auto accident, in trouble with the IRS, or bankrupt, your children’s creditors will take your assets!

Should I give away my assets to my children to avoid losing them to a nursing home or probate?

This is a bad idea. If you give away your assets, and if you then require nursing home care within 5 years, you could be disqualified for Medicaid coverage. Also, if you give away your assets, and your children get sued, divorced, or bankrupted, their creditors will take your assets.

Do probate costs eat up the entire estate?

No. Probate in Oregon is not the expensive disaster it is in other states. It is a reasonable system that is designed to be fair to creditors and beneficiaries alike. Choose an attorney carefully.

What about life insurance and annuities?

Use the beneficiary provisions provided by pension plans, life insurance, and annuities. Most pension plans and life insurance policy proceeds pass under beneficiary designations that avoid probate without use of revocable living trust. Using beneficiary designations could be a less expensive way for you to avoid probate. Be aware though, that all probate avoiding devices can result in negative consequences relating to taxes, eligibility for publicly provided long-term care, and loss of independent control over an asset.

My wife and I have children from prior marriages, what should we do?

Be careful. A blended family presents a more complex situation. One of the heartbreaks of my estate planning career is watching survivor spouses coldly disinherit their stepchildren. This happens all the time. If you have a blended family, you should have a pre-nuptial agreement or post-nuptial agreement to protect your children from being disinherited. If you do not want to see your children disinherited, do not mix your assets with your spouse’s assets, and each of you should have a separate will or trust. You may wish to use different attorneys. Call me to discuss this.

Should I have a power of attorney and an advance directive?

Yes. A power of attorney allows the most trustworthy person you know to sign your name for financial purposes while you are alive, to conduct business on your behalf. Do not appoint a person as “attorney in fact” under a power of attorney unless you trust them absolutely. An advance directive for health care allows you to appoint a person to make health care decisions for you if you are terminally ill.

Who should I appoint as personal representative?

Appoint your spouse as first choice, and your must trustworthy child or relative as second choice.

Oregon Probate, Wills, Trusts

I am an Oregon attorney specializing in probate, wills, family estate planning, and living trusts. I handle probates in all Oregon counties. My goal is to complete your probate as fast as possible while keeping your costs low.